Minimum Wage Economics

Whether President Obama convinces Congress to raise the minimum wage from $7.25/hour to $10.10/hour remains to be seen. On the surface, it sounds like a good idea. Why shouldn’t hard-working Americans get more money? Then again, health care reform sounded good on the surface also. How’s that working?

Historically, minimum wage increases have proven a dubious way to help the most vulnerable increase their standard of living. A Cato Institute paper by Mark Wilson came up with the following findings:

-The US Department of Labor concluded the first minimum wage in 1938 resulted in job losses of 30,000 to 50,000, or 10-13% of covered workers.

-Minimum wage increases are associated with an increased duration of unemployment, decreased job training, reduced school attendance, reduced fringe benefits, and increased inflationary pressure.

-The last time the federal minimum wage increased, only 15.8% of those covered came from poor households.

-Minimum wage increases are always associated with rising teenage unemployment. Teenagers and young adults who are not heads of household make up the bulk of minimum wage workers.

Other studies confirm these findings:

-A New York state increase in the minimum wage reduced employment among “younger less-educated individuals” by approximately 20%.

European countries with no minimum wage have lower unemployment rates than countries with a minimum wage.

Minimum wage increases are associated with reduced part-time employment.

With the sluggish nature of our economic “recovery”, does it make sense to impose barriers on young workers trying to gain valuable work experience? President Obama’s case doesn’t add up.

**UPDATE 2/19/13: The CBO estimates a minimum wage hike as proposed by President Obama will lift approximately 900,000 above the poverty line while eliminating 500,000 to 1 million jobs.

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One Response to “Minimum Wage Economics”

  1. A False Choice: The Economics of Hillary Clinton and Donald Trump | The Blog For Truth, Justice, & The Josh Way Says:

    […] you think minimum wage laws have consequences, regulations do harm, infrastructure spending is overrated, and free trade benefits makes us better […]

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